An economic multiplier is missing

  • Mohan Das Menon
  • Updated: Jan 04, 2016 02:20 IST
Is India a classical free economy premised on the forces of the market through the determining dimensions of perfect competition? Or is it a socialist economy wherein dictates from the State actually determine the vital economic parameters? (Reuters Photo)

With the 67th Republic Day weeks away, this indeed is the appropriate season to mark the celebrations to honour the Constitution of India. While most constitutional documents and charters of peoples are overwhelmingly political in their narrative and focus, the economic essence therein does emerge if not manifestly so. Significantly, our Constitution’s Preamble with a degree of clarity, quite assertively calls for justice that is economic, highlights liberty of thought and premises equality of opportunity and fraternity as ensuring the dignity of the individual.

However, a proposition worthy of pondering over is the degree to which our parliamentary debates, expositions and law-making processes over the past six decades and more have actually so far interpreted concepts like ‘equality of opportunity’, ‘dignity of individual’ and ‘justice, economic’ to be able to draw appropriate legal derivatives to create a new world for the poor, helpless and the needy.

India today needs these constitutional value propositions as the guiding posts to reinvent ourselves towards purposes of course correction for attaining higher goals in the rural, urban, industrial, logistic and services’ arenas of national import. In the current context, these issues and their diligent analysis hold immense significance as we celebrate the anniversary of the enactment of the ever precious ‘Constitution of India’ that denotes the Indian Republic as a State premised — not on parliamentary but constitutional supremacy.

Where indeed does the amorphous mass called the Indian economy in reality transfigure too is worthy of some scrutiny? Even a hazy attempt to answer would lead us to believe that parliamentary discussions in both the lower and upper houses of Parliament lay concentric on the polemics of politics of the day, rather than on the analytics of economics of the future, in the State of India. The average Indian politician’s grip over matters economic continue to seem invariably muddled and incomplete, and so do the comprehension levels among MPs, particularly of decision-making processes that could have positively impacted on their individual constituencies. Much as highly politicised work-stations round the country witnessed frequent lock outs, the last three Lok Sabhas serially witnessed walk-outs from the House and walk-ins towards the Speakers’ Chair to destabilise parliamentary proceedings at immense cost to the national exchequer. Even the recent Lok Sabha session was engulfed in voluble protests in utter disdain to the national needs of the hour.

India since 1947 has experimented with both centralised planning and open market options but rarely sought to synergise their respective energies to attain a ‘Bharat Methodology’ of sorts that focused on Rural India Priorities (RIPs). Not that India has not changed, but the change has been grossly inadequate, both relative to the promises made in the realm of aspirational democracy as well as in the context of the latent growth potential India possesses but never gets manifestly realised. Contrarily, what actually manifests when we seek to contend with Urban Indian Priorities (UIPs) among the youth is the incredible phenomenon of the rising rate of emigration, in reality for permanent settlement, to the West, South East and belatedly to the East as well.

Even the Planning Commission of India, despite its six decades of monitoring and mentoring of the economy’s internal flows and outflows, failed to put a finger on these intra-India and ex-India flows that involved human movements of considerable magnitudes. The second Five Year Plan was the most exhaustive of statistical amalgams, theoretical formulations and change vectors of Indian planning. Even this vexed high-powered intellectual exercise in economic planning failed to take cognisance of these human shifts, the internal one particularly at that time of plan pendency. In the same period of time, the two giants, the United States and the Soviet Union, and West Germany, were minutely monitoring intra-economy flows cogently to fine-tune the urbanisation dynamic and creating new spaces in cities, as also envisaging investment plans for the rural scape as well.

Is India a classical free economy premised on the forces of the market through the determining dimensions of perfect competition? Or is it a socialist economy wherein dictates from the State actually determine the vital economic parameters like prices, money supply and claimants to it, employment, interest rates and distribution of resources? Or is the economy so nebulously formless and bereft of economic theory to include all of the above variants? The tragedy with post-Independence economic growth has been that the two main growth streams, respectively in the public domain and the private or capitalist domain had no convergence zone that could potentially trigger an ‘economic multiplier’.

The vertical and horizontal integration that economists like Michal Kalecki propounded to link effective demand to the theory of economic dynamics dealing with equilibrium of income occurring at a given point of the cycle sadly eluded both the Indian context and the subtext of change and economic growth. Political illusions that a mixed economy was a viable proposition further aggravated the chance that these equations could in the least serve as economic guideposts for ventures in the future. That audacious pathway should be such that all politicians, prompted by the will of the people, unexceptionally would be forced to adhere to, lest they lose in perpetuity the opportunity to be the composite representative ‘avatars’ and vanguards of India’s parliamentary democracy.

Mohan Das Menon is former additional secretary, Government of India

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